Producer Prices Show Largest Gain in 1-1/2 Years

U.S. producer prices
posted their largest increase in 1-1/2 years in April as the cost of food and
trade services surged, hinting at some inflation pressures at the factory gate.

The
Labor Department said on Wednesday its seasonally adjusted producer price index
for final demand rose 0.6 percent, the biggest gain since September 2012.
Producer prices increased 0.5 percent in March.

Economists
polled by Reuters had forecast prices received by the nation's farms, factories
and refineries rising 0.2 percent. In the 12 months through April, producer
prices advanced 2.1 percent, the biggest gain since March 2012, after rising
1.4 percent in March.

Producer
prices have been volatile in recent months, driven by swings in the trade
services category. The PPI series was revamped at the start of the year to
include services and construction.

Its short
history and volatility makes it a bit difficult to discern a trend. While price
pressures are creeping up at the factory gate, the overall inflation backdrop
remains benign given the slack left over from the recession.

Last month,
food prices surged 2.7 percent, the biggest rise since February 2011. That
followed a 1.1 percent increase in March and marked the fourth consecutive
month of gains in food prices.

A drought in
California is putting upward pressure on food prices, leaving Americans
confronting higher prices at the supermarket.

Food prices
were pushed up by a surge in the cost of meats, which recorded their largest
rise since October 2003.